Chapter 5 The Service Delivery Process Chapter Objectives

Chapter 5 The Service Delivery Process

Chapter Objectives • Compare and contrast the four stages of operational competitiveness. • Appreciate the relationship between operations and marketing as it pertains to developing service delivery systems. • Describe the types of operational models that facilitate operational efficiency. • Consider the challenges associated with applying operational efficiency models to service organizations and recommend strategies that overcome some of these difficulties. • Explain the art of service blueprinting as it relates to the design of service delivery operations. • Discuss the role of complexity and divergence as they relate to new service product development. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Opening Vignette: Chipotle Mexican Grill • Chipotle sells only fresh foods and prepares everything by hand • Speed is critical • Chipotle’s delivery system is much like an assembly line – Employees manage throughput by preparing food and setting up the line before customers arrive – An expeditor and manager back up the line employees to move customers through the line quickly, minimize bottlenecks, and fill unmet service needs • More than 1, 600 stores reap more than $4 billion in sales per year © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stages of Operational Competitiveness • Strategically, the service firm can choose to view its operations as a necessary evil to complete day-to-day tasks, or use its operations as the key component of its competitive strategy • The manner in which “operational competitiveness” is embraced can be described by four stages: 1. Available for Service 2. Journeyman 3. Distinctive Competencies Achieved 4. World-Class Service Delivery © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stage 1: Available for Service • Operations are viewed as a necessary evil • Operations are at best reactive to the needs of the rest of the organization and deliver the service as specified • Primary mission is to avoid mistakes • Technological investment, investment in training, and personnel costs are minimized © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stage 2: Journeyman • Prompted by the arrival of competition • Operations become more outward-looking • Characterized by the introduction of technologically based systems for the primary purpose of cost savings • Employees are given procedures to follow • Management focuses on ensuring that standardized procedures are followed © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stage 3: Distinctive Competencies Achieved • The firm has mastered the core service and understands the complexity of changing current operations • View of technology changes from “cost savings” to “enhancing the effectiveness of service to customers” • Involves a philosophical change of balancing efficiency with effectiveness • Front-line workers may select from alternative procedures © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Stage 4: World-Class Service Delivery • The company’s name is synonymous with service excellence • Operations become adaptive and innovative – Technology provides a means to accomplish tasks that the competition cannot easily duplicate © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 1: Major Design Trade-Offs in High- and Low-Contact Systems © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Marketing and Operations: Balance Is Critical • The marriage of consumers’ needs with the technology and manufacturing capabilities of the firm – The marriage involves compromise • Customer needs can seldom be met completely and economically • Success in services marketing demands a much greater understanding of the constraints and opportunities posed by the firm’s operations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 2: Sources of Cooperation/Conflict Between Marketing and Operations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Thompson’s Perfect-World Model • To operate efficiently, a firm must be able to operate “as if the market will absorb the single kind of product at a continuous rate and as if the inputs flowed continuously at a steady rate and with specified quality” © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Focused-Factory Concept • An operation that concentrates on performing one particular task in one particular location • Used for promoting experience and effectiveness through repetition and concentration on one task necessary for success © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Plant-Within-a-Plant Concept • The strategy of breaking up large, unfocused plants into smaller units buffered from one another so that each can each be focused separately • Organizations seek to buffer environmental influences by surrounding their technical core with input and output components © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Applying Efficiency Models to Services • The servuction system itself is an operations nightmare – It is impossible to use inventories – It is impossible to decouple production from the customer – The system is linked directly to the market • Demand varies from day to day, hour to hour, minute to minute – Massive problems in capacity planning and utilization © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Operations Solutions for Service Firms 1. Isolate the technical core – Different management philosophies should be adopted for each separate unit of production – The technical core should be subjected to production-lining approaches – High-contact systems should sacrifice efficiency in the interest of the consumer 2. 3. 4. 5. Production-lining the whole system Creating flexible capacity Increasing customer participation Moving the time of demand © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Flowcharts • Identify directions in which processes flow • Identify the time it takes to move from one process to the next • Identify the costs involved with each process step • Identify the amount of inventory buildup at each step • Identify bottlenecks in the system © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Art of Blueprinting • Blueprints provide a means of communication between operations and marketing and can highlight potential problems on paper before they occur – Show points of customer contact © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 3: Blueprint for Cafeteria-Style Restaurant © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 4: Modified Blueprint for Cafeteria-Style Restaurant © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 5: Alternate Blueprint for Cafeteria-Style Restaurant © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 6: Flowchart of a Discount Brokerage Service © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Blueprinting and New-Product Development: The Roles of Complexity and Divergence • Complexity—a measure of the number and intricacy of the steps and sequences that constitute a process – Specialization positioning strategy • Reduces complexity – By unbundling the different services offered – Penetration positioning strategy • Increases complexity – By adding more services and/or enhancing current services to capture more of a market © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Blueprinting and New-Product Development: The Roles of Complexity and Divergence (cont’d) • Divergence—a measure of the degrees of freedom service personnel are allowed when providing a service – Volume-oriented positioning strategy • Reduces divergence – Produces standardized output and reduces costs but does so at the expense of increasing conformity and inflexibility – Niche positioning strategy • Increases divergence – Tailors the service experience to each customer © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 7: Park Avenue Florist © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 5. 8: Florist Services: Alternative Design © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.